YOURS, MINE, OURS?
So, you've met "The One" and you're thinking of shacking up? A recent
Marriage and Home Buying Study
from Coldwell Banker Real Estate found that one in four couples between the ages of 18 and 34 bought a house together before they were married. While previous generations may have balked at the idea (my parents included), today there are many compelling reasons to purchase a house before marriage. Our presently low mortgage rate environment, the desire to build equity over time and escalating Bay Area rents make home ownership not only alluring but completely logical for a growing number of couples in a committed relationship.
Buying a home together may sound fun and economical, but the law is vague when it comes to protecting unmarried couples should the union fizzle. You would be well-advised to proceed with caution. This may be the biggest, most complex financial decision a couple will make together and it is crucial to have the proper agreements in place to safeguard your financial positions down the road. A few tips on how to proceed:
Know Your Ownership Options
Title and taxation issues are profoundly different between marrieds and unmarrieds and how you decide to take title will have enormous, lasting consequences, particularly when it comes to estate planning. This matter requires very careful consideration and I would urge you to seek the counsel of an experienced real estate or estate planning attorney to avoid costly, painful mistakes.
Generally, there are three basic options for taking title as unmarrieds when buying a house for purely personal use:
Tenants in Common
. Our in-house mortgage broker, Dennis Kowalski of Guaranteed Rate, would be happy to discuss these options and more in detail and answer any questions you may have on the subject (contact information listed below).
In order to qualify for a mortgage, one must lay themselves bare financially before their mortgage broker (outlining credit card debt, student loans, savings, investments, salary, etc.) so it would behoove you to have an open, honest discussion with your significant other now and deal with any issues which might potentially derail the purchase.
Consider a Prenup for Your Home
Patrick Horning of Northwestern Mutual suggests a Prenup for the home. Not to be confused with the standard Real Estate Purchasing Agreement (“RPA”), a Home Buying Prenuptial addresses issues such as who pays for what and what happens if one partner is unable to meet his obligations, you decide to sell the house or the relationship dissolves. While buying and sharing a home together could be one of the most joyful experiences of your life, this legally binding agreement serves to protect each of you financially should something go awry.
Some say "love is blind", but you can rest assured this team of real estate professionals is not. We're here for you when you need us. Happy Valentine's Day!
I encourage you to seek legal counsel when vesting title to property as this is a complex subject with long-lasting implications. Feel free to contact me for a referral to a local real estate or estate planning attorney for more information